Investors who hold exchange-traded funds (ETFs) may be interested in cryptocurrency, but not comfortable with investing directly in crypto coins. The expectation is to wait for a reputable institution like BlackRock or Fidelity to bring a Bitcoin ETF to market, enabling investors to get exposure in crypto without having to buy digital coins directly. Turns out, ETF investors can already invest indirectly in Bitcoin (BTC) and other crypto assets via traditional brokerage platforms.
We analyzed over two dozen stocks of Bitcoin and crypto companies as well as crypto-adjacent companies (i.e. companies that offer non-crypto products as well as crypto products) to determine potential good investments. We broke down our selections into five categories: Best value crypto stocks, fastest-growth crypto stocks, digital companies with the strongest potential, crypto stocks with the strongest momentum and best crypto mining firms. For the sake of brevity, we simply refer to each of the stocks mentioned in this report as “crypto stocks.”
Please keep in mind that short-term prices of crypto stocks can be just as volatile as the price of Bitcoin (BTC) — if not more volatile — so please invest with caution.
To determine our winners, we looked at the company’s underlying fundamentals and year-over-year (YoY) revenue growth, as well as the impact recent news may have on stock valuations and how far off the current stock price is from its all-time trading high.
Here are the equities to consider:
Block is a digital payments company that was co-founded by Jack Dorsey, founder and former CEO of Twitter. One of the companies Block owns is CashApp, which enables you to purchase and transact with BTC. YoY revenue growth for Block as of Q1 2023 was 32%. The stock is still trading approximately 70% off its all-time highs.
Applied Digital is a US-based company that provides high-performance computing (HPC) services to blockchain and artificial intelligence (AI) companies. The company’s market cap is over USD$900 million, plus it recently signed a USD$180 million deal with Character AI. News of the deal boosted the stock’s price, but there may be more room for growth as its share price is still trading at about 75% off its all-time highs.
Canaan created the world’s first Bitcoin ASIC miner, the most popular device used to mine BTC. The company is headquartered in Singapore and plans to focus on the development of “green mining.” While YoY revenue growth, as of Q1 2023, was negative, this is to be expected in Bitcoin bear markets, since fewer Bitcoin miners purchase mining hardware when BTC’s price is low. That said, CAN is still trading at more than 90% off its all-time highs.
To determine winners, we predominantly looked at YoY revenue growth as of Q1 2023 (or a comparable quarter). We also considered the stock’s performance year-to-date (YTD).
Here are the companies to consider:
Applied Digital Corporation’s revenue grew 193% YoY as of its fiscal Q4 2023 (March-May 2023). Its stock is up over 400% YTD. (For more on Applied Digital, see the company description in the previous winner’s section.)
Interactive Brokers is a brokerage that enables you to trade across a variety of asset classes, including crypto. YoY revenue for the company was 63.72% as of Q1 2023, and its stock is currently trading within 10% of its all-time high.
Robinhood is a brokerage that allows you to invest in both traditional assets like stocks and ETFs as well as crypto. After a rough 2022, the company’s revenue is up 47.49% YoY as of Q1 2023. HOOD is up approximately 60% since the beginning of the year.
To determine winners, we considered the overall scores for each stock as per our methodology as well as the fundamentals of the company underlying the stock and any positive recent news for the company.
Here are the firms to consider:
Coinbase is the second largest crypto exchange in the world by trading volume. If BlackRock gets the go-ahead from the US Securities and Exchange Commission (SEC) to bring a spot Bitcoin ETF to market, Coinbase will serve as the custodian for the ETF. Plus, the recent district court ruling that determined XRP is not a security when sold on secondary markets (like Coinbase) will give the company leverage as it fights the SEC’s charge that the company is acting as an unregistered securities exchange, broker and clearing agency. COIN is up over 200% YTD.
A spot Bitcoin ETF is an open-end fund that can issue or redeem shares based on demand. It’s designed to track the spot price of Bitcoin closely.
Advanced Micro Devices (AMD) makes central processing units (CPU) and graphics processing units (GPU) to make blockchain transactions faster and more secure. The company’s business model is similar to that of NVIDIA, yet its market capitalization is less than one-fifth of NVIDIA’s. AMD has almost doubled since the beginning of the year while it’s still trading over 30% down from its all-time highs.
Riot is a US-based Bitcoin mining company. In Q1 2024, it plans to add 33,000 miners to its current total of 88,556 miners. Better still, the company has more cash and cash equivalents than other miners and is debt-free. RIOT is up more than 400% YTD, yet it’s still trading more than 75% off its all-time highs.
We excluded Bitcoin miners in this section because, by and large, they’re the best-performing type of crypto stock YTD (most are up between 100% and 500% since January 2023), and we didn’t want them to overshadow all other crypto companies in this section. Plus, the following section is dedicated to Bitcoin miners.
Here are the firms to consider:
COIN recently rallied upon a US district court judge’s ruling that XRP isn’t a security when sold on a secondary market like Coinbase. (Read more about Coinbase in the previous section.)
MicroStrategy is an enterprise analytics company that provides software solutions and expert services for businesses and individuals. The company became a household name when it purchased 21,454 bitcoins as part of its capital allocation strategy in August 2020. MSTR has been a proxy for a spot Bitcoin ETF in the absence of one. It’s up 200% YTD, though it’s still trading more than 65% off its all-time high.
NVIDIA is a technology company that produces GPUs for crypto mining and AI, amongst other industries. This year, it joined Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL) and Amazon (AMZN) as one of the five publicly-traded companies with a $1 trillion market capitalization. NVDA is up over 200% YTD and is currently trading close to its all-time high.
To determine winners, we selected the stocks of Bitcoin mining companies that had the highest scores as per the technical analysis portion of our methodology while also considering the company’s fundamentals.
Here are the bitcoin miners to consider:
Marathon is a Bitcoin mining company founded in 2010 and based in Las Vegas, NV. It has a relatively large market capitalization — over USD$2.6 billion — compared to other Bitcoin mining companies. Marathon significantly increased its BTC holdings in May 2023, in part thanks to the increased popularity of Bitcoin Ordinals, which have increased transaction fees on the network. MARA is up over 300% YTD.
See the company description in the “Digital currency companies that hold major potential” section.
Iris Energy is a Bitcoin miner that focuses on using renewable energy to mine BTC. While IREN is up over 300% this year, keep in mind that the stock can be quite volatile, especially given that the company’s market capitalization is only $375 million.
*All company and stock data accurate as of July 2023
To come up with our top three stocks in each of the five categories, Finder’s investment experts employed the following criteria and considered the following factors and questions:
To arrive at scores for each stock based on technical analysis, we employed the following methodology.
Investing in digital assets poses certain risks that aren’t associated with investing in crypto stocks. Investing in crypto stocks allows you to gain exposure to the crypto market without having to purchase digital assets directly.
One risk with buying crypto directly is that you can potentially lose access to your crypto assets if you leave them in the custody of a centralized crypto exchange or platform that goes bust, as we saw in the cases of FTX and Celsius.
Another risk is that you could lose the private keys to your digital assets if you hold them in a non-custodial wallet, which would permanently disable you from accessing the assets.
When you invest in crypto stocks, neither of these risks are present. Crypto stocks give you exposure to the crypto market or its underlying blockchain technology without the unique risks associated with owning crypto directly.
In addition to eliminating some of the unique risks associated with investing in crypto directly, crypto stocks tend to perform very well in bull markets.
For example, since most markets have rebounded after the broader bear market of 2022, which negatively affected most asset classes, crypto stocks have done exceptionally well.
Stocks like Coinbase Global (COIN) and MicroStrategy (MSTR) are both up over 200% YTD, while some crypto miners, such as Marathon Digital Holdings (MARA) and Riot Platforms Inc (RIOT), seeing stock prices soar to 300% YTD.
If you’re looking to add some risk to your portfolio during a bull market without buying digital coins themselves, you might consider investing in crypto stocks.
Another advantage is when you invest in crypto stocks you can hold this investment in an RRSP. This is a big benefit since Canadian investors may want a less difficult method to invest in crypto directly in their retirement accounts.
Like crypto assets themselves, crypto stocks are quite volatile.
Many crypto stocks perform better than a benchmark index like the S&P 500 during bull markets but fall in value much more than the S&P 500 during bear markets.
For example, Block (SQ) increased about 780% in value from March 2020 to November 2021, while the SPDR S&P 500 ETF Trust (SPY) — the ETF that tracks the S&P 500 — increased approximately 215% in the same time period. Then, from November 2021 until November 2022, SQ lost about 75% of its value, while the SPY only lost 33%.
It’s also important to note that companies like Applied Digital Corp (APLD) and Advanced Micro Devices (AMD) could eventually pivot out of producing devices for crypto mining and focus more on producing devices for artificial intelligence (AI) machines, or MicroStrategy (MSTR) could decide to sell its BTC holdings. If such things were to happen, it might still be profitable to remain invested in these companies, but you wouldn’t necessarily have exposure to the crypto market by continuing to hold these stocks.
If you are new to investing and your risk tolerance is low, you might want to think twice before investing in crypto stocks.
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